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Record Fonterra payout means ‘good times’ for all

Media Release

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27 February 2014

Record Fonterra payout means ‘good times’ for all

While the dry summer is starting to bite in parts of Waikato and Northland, Fonterra has delivered excellent news for New Zealand by upping its 2013/14 forecast Farmgate Milk Price to a record $8.65 per kilogram of Milk Solids (kg/MS).

“You can say New Zealand is truly a land of milk and honey with the two being at record highs,” says Willy Leferink, Federated Farmers Dairy chairperson, speaking from Federated Farmers Dairy Council in Wellington.

“I also think this will put a huge smile on Minister Guy’s face when he speaks to us later this morning.  If the forecast sticks this represents ‘good times’ for all Kiwis.

“In 2010, the NZIER said a $1 kg/MS rise in Fonterra's payout makes every New Zealander nearly $300 better off.  Given this latest 35 cent kg/MS uplift, every New Zealander could be $100 better off as a result of what we do.

“This forecast payout is now in the all-time record category too. 

“The current record remains a $7.67 kg/MS payout back in 2007/8, which, when adjusted for inflation, comes in at $8.51 kg/MS today.

“A forecast of $8.65 kg/MS, with the ten cent kg/MS dividend on top, means potential cash in hand for a fully shared up Fonterra farmer-shareholder of $8.75 kg/MS.  Most welcome is the 25 cents kg/MS increase in the monthly Advance Rate schedule from March to June.

“Yet we seriously caution farmers from counting their milk solids when sitting at the table, there’s plenty of time for counting when the season’s done.

“I am pleased to say that dairy farmers are heeding Federated Farmers message despite a series of positive forecasts, excepting the previously announced hair cut to the dividend.

“If you are a car dealer or rural agent I wouldn’t be rubbing my hands just yet.  In the three months to January 2014, the Real Estate Institute of New Zealand’s Dairy Farm Price Index actually fell by 2.9 percent. 

“In a key area like Canterbury, the REINZ noted that the dairy farm market had plateaued and demand for very good properties was being driven mainly by local buyers.

“It tells me there’s a realisation that forecasts are just that and in the case of the North Island, a great 2013/14 is needed to make up for a lousy 2012/13 drought affected season.  The climb of dairy commodities behind this revised forecast can be traced to less than optimal conditions facing our competitors abroad

“That’s why I am confident farmers are on conservative budgets and if it does stick, then they will prioritise debt retirement and productive investment, especially on environmental works. 

“Federated Farmers now anticipates the other dairy companies and cooperatives will be revising their payout forecasts to near match, if not better, Fonterra,” Mr Leferink concluded.

ENDS

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